Demolition of a closed Albertsons store has begun, a first step in the long-awaited transformation of the underperforming Pinole Valley Shopping Center.

A Trader Joe’s food store and a Walgreens drug store will be the new anchor tenants. The stores are expected to open in summer or fall of next year.

The shopping center has been a money-loser for the Pinole Redevelopment Agency since it acquired it out of foreclosure in 2001 for $3.8 million. The Kivelstadt Group, the agency’s partner, owns 20 percent of the shopping center and can buy in for up to 20 percent more at $100,000 for each percent.

The shopping center lost $626,000 in 41/2 years through the end of 2005, according to a financial review. In that time, TKG collected $403,000 in management fees.

The rate of loss accelerated after Albertsons closed in January 2006. TKG and the city believe a reconfigured shopping center anchored around Trader Joe’s and Walgreens can be profitable for both partners.

Demolition of Albertsons began last week. TKG had hoped to start May 1, but the City Council demanded the general contractor get a performance bond, causing some delay. The council made the bond a condition for putting the city’s interest in the center up as collateral to allow TKG to get an $18.5 million construction loan from Mechanics Bank.

The city’s investment in the center stands at $6 million, not including another $700,000 to buy a parcel that once housed a gas station, since demolished. The former gas station lot will be part of the new shopping center.